As a testament to the overcorrection in mortgage underwriting mentality, Kenneth Harney in his The Nation’s Housing column writes about the IRS Form 4506-T that
authorizes a loan officer or mortgage investor to get electronic transcripts from the Internal Revenue Service covering multiple years of your federal income tax filings.
A transcript is pulled at mortgage application and at closing as an attempt by Fannie Mae to reduce mortgage fraud.
One has to ask themselves, why should this be a new process? I remember during the credit boom, no one seemed to care whether someone had the income they claimed they did, after all, real estate always went up and defaults would not be a problem.
Of course with other issues, like toxic mortgage titles, a petty thing like actually proving borrower income [sarcasm] now seems kind of important.
At issue is proof of ownership at the time of a foreclosure sale. During the housing boom, millions of mortgages were bundled into bonds and sold to investors, a process that resulted in lengthy and twisted paper trails that can obscure ownership. Many lenders believed they could complete foreclosure transactions and later produce formal proof they held the mortgage.
Its a lesson learned – problems at the end of the mortgage process (foreclosure) make it imperative and obvious to reduce the probability of later default at the beginning of the mortgage process. Hence a credit crunch.
Tags: Fannie Mae
Ask yourself this, what will you do to keep the wolf from the door? Everywhere you turn it seems there is bad news, falling stocks, higher interest rates, rising unemployment, rising fuel prices and crippling inflation. What you do now makes all the difference. Are you a winner or a loser? Well, it doesn’t really matter what you are because sooner or later that wolf will come calling. The ordinary people like you and I need to use our animal instincts to survive. Thanks to years of excess brought about by cheap borrowing most of us ordinary people are now feeling the pinch.
I’ve heard it said that every buyer should have an advocate. That is true now more than ever.
There is nothing wrong with double checking income to make sure you have a viable mortgage prospect.We should have been doing that all along. That being said hard and fast mortgage qualification criteria will leave some buyers out in the cold.
Because Form 4506-T (Request for Transcript of Tax Return) is valid for only 60 days after completion (including signature) by the borrower, completion of the 4506-T at both application and closing will allow lenders to perform both prefunding and post-closing reviews as necessary.